3.1 Changes in the labour market over the past 35 years

“Labor will become less and less important. ... More and more workers will be replaced by machines. I do not see that new industries can employ everybody who wants a job.” Wassily Leontief (1952), cited by Acemoglu and Restrepo (2017)

Although Leontief’s observation did not materialise for another thirty years, the process finally started in the early 1980s, and the emergence of new information and communication technologies (ICT), which is still continuing today, has induced profound changes in all countries across the world. One of the most important changes took place in the labour market. This chapter discusses how the structure of the labour market has been influenced over the past 35 years by the robotisation of specific work processes, and the emergence of increasingly efficient technologies to collect information and facilitate communication.

In the labour markets of developed countries, changes the 1980s onwards there was a major increase both in the wage inequality between employees with different skill levels, and in the demand for specific occupations.

Chart 3-1 Changes in earnings in the US, 1963–2008

As shown in Chart 3-1, in recent decades the wages of high-earning employees in the US have grown at a much faster rate than those of middle or low-earning employees. There is a huge gap between the highestskilled and the lowest-skilled employees: while the real earnings of an employee in the 90 th percentile have increased by more than 60%, the real earnings of those at the 50 th percentile grew only by 30%, and for those at the 10th percentile by even less, 25% (Acemoglu and Autor, 2011). In other words, the difference between very high and very low wages increased by some 35%. Although the chart shows wage growth rates from 1964, it is also apparent that the significant increase in took place on a large scale. As shown in this chapter, from

inequality started in the late 1970s and early 1980s. These labour market developments did not take place in the US alone. In their summary of the wage gap between high and low-earning employees in 16 developed countries, Katz and Autor (1999) find that inequalities have increased in most cases, although to a more limited extent than in the US. The authors conclude that while the underlying economic developments (discussed in detail below) are similar to those taking place in the US, labour market institutions are capable of mitigating the inequalities.

Source: Acemoglu and Autor (2011), Chart 7, panel A.